U.K. House Prices Reach Five-Year High as London Lead Widens

An estate agent is seen placing a "For Sale" advert in the window of the estate agents office in this arranged photograph in Folkestone, U.K. Photographer: Chris Ratcliffe/Bloomberg

April 12 (Bloomberg) -- London’s property market powered a
seventh month of increases in U.K. house prices in March as
values reached a five-year high, according to Acadametrics Ltd.

The average cost of a home in England and Wales rose 0.2
percent on the month to reach 230,078 pounds ($354,000),
Acadametrics and LSL Property Services Plc said in a monthly
report published in London today. Excluding the capital, prices
fell 0.1 percent on the month.

The Bank of England introduced a program to boost lending
last summer, and today’s report signals that access to mortgages
may be easing. It also adds to evidence of the regional
disparity in the U.K. property market, with London prices rising
at three times the pace of the national average.

“Sadly, the improvements in mortgage availability, prices
and sales have not been spread evenly,” said David Brown,
commercial director of LSL. “The market in the Southeast,
particularly London, is going great guns, but less affluent
areas are struggling.”

LSL and Acadametrics said more mortgages for first-time
buyers are “key to the recovery.” While the BOE’s Funding for
Lending Scheme has helped, it needs to be increased in scale,
they said. They also said the government’s 3.5 billion-pound
pledge last month to help homebuyers should support the market.

London Surge

Excluding London from the annual house-price increase of 3
percent would leave the average rise nationally at 0.5 percent,
LSL and Acadametrics said. The 2.5 percentage-point divergence
is the largest recorded since they began monitoring this effect
in July 2005.

The report also showed that home values in London rose 11.3
percent in the past three months compared with the same period a
year earlier. The average across England and Wales was 3.7
percent. In the north of England, prices fell 1 percent.

Separately today, the Office for National Statistics said
that U.K. construction output rose 5.5 percent in February from
January on a non-seasonally adjusted basis. From a year earlier,
construction fell 7 percent. Construction accounts for 6.8
percent of gross domestic product and will be used in the
compilation of first-quarter GDP data, due to be published on
April 25. The statistics office said that the February growth,
“while appearing strong, is based on low volume of output in
January.”

In its report, Acadametrics estimated that nationally, home
sales in the first quarter fell 5 percent from a year earlier,
when activity was boosted by first-time buyers looking to beat
the expiry of a tax break on some purchases. Full-year
transactions will rise “modestly,” it forecast.

“There is still a long way to go,” Brown said. “Mortgage
availability is poor by historic standards. There is an army of
first-time buyers trying to enter the housing market.”